Matahari's steps in awaiting value migration

Matahari's steps in awaiting value migration

E-commerce is still considered a luxury in Indonesia,
especially considering the fact that e-commerce infrastructure is
not yet cheaply available countrywide. And in the current hard
economic conditions, with the rupiah still very low against the
U.S. dollar, it is almost impossible to build e-commerce
infrastructure widely and cheaply. Therefore, businesses which
have the potential to be affected by value migration due to e-
commerce still exist.

But, this does not automatically mean that these businesses
can exist peacefully, ignoring the threat. E-commerce, however,
depends on telecommunications and the Internet. There is, in
fact, another mode which enables the emergence of businesses like
e-commerce, such as home shopping services through television or
just telephones.

This change is unavoidable because everywhere in the world
there is always a change in the business model, which leads to
more power for the customers. Business was initially determined
by manufacturers; they were in the position of pushing their
interest to the customers. Just remember the popular quote by
Ford automotive industry founder Henry Ford: "You can choose any
color as long as it's black."

Yet, the dominance of the manufacturer began to fade when the
number of manufacturers began to increase drastically and the
customers were becoming smarter. The large number of players did,
indeed, increase choices but, customers usually wanted to choose
products that were offered easily and comfortably. This kind of
condition led to the mushrooming of supermarkets, department
stores and, more recently, specialty stores.

In such a condition, intermediaries like supermarkets,
department stores and specialty stores were able to obtain a
power which was even stronger than that of the manufacturers and
customers. With the capability to lure prospective customers,
they could finally determine the types of products that could be
offered by manufacturers to the customers.

It can be acknowledged that in their efforts to attract
prospective customers, supermarkets, department stores and
specialty stores always rely on context differentiation: trying
to sell an atmosphere. That's why, in the condition where
supermarkets, department stores and specialty stores still play
the key role, customers frequently carry out their buying
activities not only for shopping but also for recreation.
However, context differentiation is not always dependable,
especially when the customers are faced with shortcomings like
time and distance. So they will usually take into consideration
the ease with which to get their needs and cheap prices. To
overcome this problem, they usually try to create a new
differentiation, so that they can continue to attract prospective
customers to their premises. This kind of effort leads to the use
of private labels (house brands), where they label products as
their own.

Generally, house brands comprise daily basic household goods,
such as sugar, rice and even drinks. The most important thing is
that they are for daily consumption. Why? Because for daily
consumption products, besides quality, price usually becomes the
main consideration. The functional benefit. While the emotional
benefit usually becomes a secondary reason.

Though they can actually house-label other products, including
those other than routine household needs, still, not many
retailers or specialty stores leverage their brand-equity by
using private labels. Therefore, the decision taken by the
Matahari Department Store to launch Stanley Adams is clearly an
interesting phenomenon. Matahari is the biggest department store
chain in Indonesia. It launched its own brand, Galeria, to
capture the class-A and class-B economic strata. In its
department stores, Matahari has, of course, become the place for
many local and foreign garment producers to promote their
products.

Matahari has not only been successful as a department store,
but has also become a trendsetter for the Indonesian people's
lifestyle. Matahari has succeeded in pushing changes in the
shopping behavior of Indonesians, besides having a strong
position to attract prospective customers. In short, Matahari has
a clear position. Therefore, they want to leverage their brand-
equity by launching private labeling. It is interesting that
Matahari does this for its garment products, which are not
routine household needs.

Matahari seems serious in launching its private label for its
garment products Stanley Adams. This is understandable since the
products are introduced amid tight competition with renowned
brands already occupying Matahari counters, such as Valino,
Arrow, Piere Cardin and Saville Row. Therefore, Stanley Adams
cannot only take advantage of the opportunity as a product made
and owned by the department store but must rely on its brand-
equity.

What does Stanley Adams need to do for this? First, by showing
it has quality. And Matahari clearly carries this out through its
Pin Poin, which is the garment's fabric composition attached to
the item's label, like clarifying a special weaving technique
using 100 percent cotton, fabric which is nonwrinkle, soft,
comfortable to wear, long lasting and easy to maintain.

Second, inexpensive pricing. The price could be between 30
percent and 40 percent cheaper compared to other products of the
same quality. This is made possible by the fact that Stanley
Adams can save storage costs and distribute its products to all
Matahari counters economically. The third step is by launching a
loyalty program through offering special facilities and gifts to
loyal customers. These three ways of building brand-equity proved
effective; the Stanley Adams brand quickly gained popularity.

Of course, the success in building this brand-equity has had a
positive impact for Matahari and Galeria, which have become
exclusive places to sell Stanley Adams. Nationwide, Matahari has
gained a respected context differentiation which attracts
customers. This is an interesting phenomenon. Matahari has
managed to build a bastion which will help minimize the
possibility of value migration from shopping at department stores
to home shopping. Taufik